Law society of Scotland under fire over tax haven firms

Added on
07/04/2017

SCOTLAND’s solicitor’s body has been warned against defending “aggressive tax avoidance” after it was revealed Scots “zero-tax” firms were used in the £6.4 billion takeover of Formula One, reports The Herald.

The Law Society of Scotland yesterday took a stand against any specific measures to prevent controversial Scottish Limited Partnerships or SLPs being used as fronts for global money-launderers and other gangsters.

It did so after The Herald revealed America’s Liberty Media had bought F1 with the help of two SLPs after declaring it had found a way of avoiding “incremental taxes for many, many years”.

Roger Mullin, the SNP MP who has led the campaign in the Commons for reform of SLPs, said: “It is rather sad that the Law Society should be so complacent about the extent of criminality associated with SLPs. One wonders if the Law Society is more interested in defending aggressive tax avoidance strategies of wealthy clients, rather than ensuring Scotland builds a reputation for ethical practice.”

The Law Society was responding a UK Government consultation on how to stop mass criminal abuse of SLPs – which are advertised across the former Soviet Union and beyond as “zero-tax Scottish offshore companies”.

In a formal submission, the body stressed the structures played a key role in Scotland’s cottage industry providing tax-efficient platforms for private equity funds and other investors.

Green MSP Andy Wightman, who has also campaigned for action on SLPs, added: “The Law Society has a statutory duty to work in the public interest. In responding to this consultation, the society appears to have forgotten this important duty.

“By focusing on the legitimate uses of SLPs and by deflecting concerns to other types of corporate structures, it is ignoring the widespread criminality associated with SLPs that appears to have become endemic in recent years.”

Scottish law firms create scores of such partnerships every year as tax avoidance vehicles for private equity funds. Last year there were 300 such entities created for financial services, including the F1 shell firms. However, these were dwarfed by nearly 5,000 SLPs formed by opaque partners in traditional tax havens, many then sold off-the-peg as secrecy vehicles

Current Westminster laws allow the owners of SLPs to be anonymous, file no accounts and pay no taxes but still own assets – such as shares – just like an ordinary company. This makes the entities attractive to both equity funds and gangsters and corrupt officials who wish to hide behind a respectable looking Scottish front.

The Law Society fears closing the specific SLP loophole will prevent competition with tax haven jurisdictions such as Luxembourg.

Michael Clancy, its director of law reform, said “We are fully committed to measures which would prevent SLPs being used for criminal purposes.

“To ensure such measures are effective, any review must be expanded to look at other UK-wide business structures. After all, any review or reform which is too limited or narrow could simply end up displacing criminal activity rather than preventing it.”

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